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2019: a blockbuster year for UK fintech investment

2019: a blockbuster year for UK fintech investment

Fintech investment in the UK grew substantially in 2019 to $48.5bn from $25.4bn in 2018.

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UK fintech attracted $48bn funding through 2019 according to the Pulse of Fintech H2’2019, a bi-annual report on global and regional fintech investment trends published by KPMG.

UK fintech transactions reached a six-year high and defied the global picture where fintech investment fell just shy of 2018’s record with $135.7 billion. The UK accounted for half of Europe’s ten biggest deals and over 80% of Europe’s overall, record setting, fintech funding of $58bn in 2019.

Globally, the main theme in 2019 was market diversity – with fintechs and fintech investment expanding across product, sector and geographic borders. In fact, despite various geopolitical tensions, cross-border transactions remained very high with over $50 billion in cross-border M&A deal value across 138 deals. This focus on cross-border transactions will likely continue as maturing fintechs look to grow and achieve scale and the big tech giants look to extend their reach and gain market share in less developed markets.

Miles Celic, Chief Executive Officer, TheCityUK, says, “As a world-leading FinTech hub, the UK offers ambitious firms a competitive base for their global growth. The UK FinTech market is showing increasing signs of acceleration, with large-scale deals and confident plans for global expansion gathering real pace. It is encouraging to see the partnership model bearing fruit, providing the right mix of capital, expertise and innovation to propel the financial and related professional services industry forward.”

“It’s been another fantastic year for UK fintech. Over the past year, the lines have really started to blur between financial services and non-financial services, with fintech companies helping to bridge the gap – we expect this trend to continue into 2020” said Anton Ruddenklau, Global Co-leader of Fintech, KPMG International. “Some of the biggest deals have been clear examples of investment in fintech solutions that are more focussed on supporting other businesses digital infrastructure and this, in turn, is attracting investors towards the potential for quicker-to-profit models. Just look at how the big tech giants are working with both traditional financial institutions and fintechs in order to seamlessly integrate financial services within their ecosystems, and at how the larger fintechs and financial institutions are looking at ways to broaden their offerings into adjacent areas. There’s also been notable geographical expansion this time around, as the digital banks prove themselves shining examples of the UK’s potential as we embark on life outside of the EU.”

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Key Predictions for 2020

• The big tech giants like Alphabet, Alibaba, and Tencent will increase their focus on the fintech space, both working to increase their reach into developing markets and to increase the value and seamless of their ecosystems to their customers.
• Maturing fintechs and challenger banks will continue to expand the breadth of their service offerings beyond their initial niche focus areas and make strategic moves across international borders.
• The unbundling of financial products will begin to reverse course as consumers increasingly seek a primary interface to manage all of their financial affairs on a holistic level.
• Cybersecurity-focused fintechs will become more attractive as traditional financial institutions shift from building to buying cyber solutions, particularly in areas like fraud, security, and identity management.
• Consolidation is going increase, with bigger and bolder M&A deals becoming the norm in more mature fintech sub-sectors.
• Building on the momentum of Hong Kong (SAR) and Australia, more countries in the Asia Pacific region will develop digital banking regimes and use digital banking licenses to guide digital bank efforts.
• The focus on open data opportunities will move beyond banking and into other aspects of the financial services industry.
2019 Key Global Highlights
• Global fintech investment fell short of 2018’s record year, with $135.7 billion invested in 2019 compared to $141 billion in 2018.
• Global fintech M&A rose from $91 billion in 2019 to a record-high of $97.3 billion in 2019, despite a strong drop in the number of M&A deals from 622 to 426.
• Global corporate VC investment participation rose during every quarter of 2019, leading to $16.7 billion in total annual VC invested with CVC involvement; CVC-related deal volume was also robust, with 553 deals over 2019, including 166 in Q3’19 – the second-highest quarter ever in terms of CVC fintech deals volume after Q2’18.
• Cross-border M&A held strong at $54.2 billion in deal value – despite ongoing global trade tension
• The number of fintech deals by global tech giants – including Alibaba Group, Alphabet, Apple, Baidu, IBM, Microsoft and Tencent – increased for the fifth straight year, with $3.5 billion invested across 46 deals in 2019.
• Cybersecurity related fintech investment more than doubled year-over-year, from $316.9 million to $646.2 million.
• Proptech investment rose to a record high of $2.6 billion in 2019 from $1.9 billion in 2018.

Find the full Global Pulse of Fintech H2 2019 here: https://home.kpmg/xx/en/home/campaigns/2020/02/pulse-of-fintech-h2-2019.html

For more information contact:

Olivia Shalofsky, KPMG Corporate Communications
M: Tel: +44 (0)7469441308
E: Olivia.shalofsky@kpmg.co.uk

Christina Bridge, KPMG Corporate Communications
M: Tel: +44 (0)7789 504905
E: Christina.bridge@kpmg.co.uk


About KPMG in the UK

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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